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Tuesday, May 25, 2010

Business Organization and Succession Planning

In 2007, I wrote about the importance of business succession planning. Nothing has changed. Having a clear plan as to how to transfer the ownership of a business is crucial. However, merely transferring your interest in a business to your next of kin is only part of the equation. A good business succession lawyer will also try to make sure that you are comfortable with who will actually run your business when you no longer capable of doing so. If you are not really sure whether any of your family members can run the business, and you have not been mentoring someone to take the reins from you, it is probably a good idea to meet with a business consultant.

Tom Reinhard of the Juncture Group suggests that owners should document and make flow charts for key business processes and develop position descriptions for key employees. If a key person dies or suddenly becomes ill, this information can be vital to the continuity of a business. Tom also notes that by going through this process, owners and managers often find ways to improve their business.

Tom specifically recommends:

1. Document organizational roles and responsibilities along with a chart of organizational reporting relationships. Writing clear descriptions of each employees roles and responsibilities, has a side benefit besides making a new employee’s job clear. It can also help uncover when employees are duplicating their efforts or when there are gaps in responsibilities. These descriptions can be very helpful in searching for and identifying suitable candidates to fill vacant job positions.

2. Developing base line documentation of core business processes. After members of your staff describe the tasks for which they are responsible and write down the details of how they accomplish their duties, these written descriptions can be improved though the development of work flow diagrams and flow charts. The process descriptions and charts often reveal opportunities to improve the quality and efficiency of the business. It is also a great way for a new senior executive to obtain a quick understanding of how the business runs.

3. Engage the key members of the organization in periodic review and update of the aforementioned documents to adjust for changes and process improvements. Getting your staff involved in maintaining process documentation is a great way to involve them in improving the efficiency and productivity of the business.

There are many things that are out of your control as a business owner. However, by working with a business succession attorney and a business consultant you can better ensure your enterprise continues to move forward if tragedy hits.

Thomas Reinhard and the Juncture Group may be contacted at 609-799-3386. For more information about Tom, please see:

Friday, May 21, 2010

New Jersey Estate Tax for Non-Residents Coming?

New Jersey State Senator Andrew Ciesla, a Republican from Brick, has introduced legislation to modify the New Jersey estate tax so that non-residents, in addition to residents, are responsible for paying the tax.

Currently, New Jersey has two types of death taxes. There is the New Jersey estate tax, which generally imposes a tax of 6-12% on all estates over $675,000. The New Jersey estate tax is currently only imposed upon the estates of decedents who are residents of New Jersey.

Additionally, New Jersey has an inheritance tax of 0-16%, depending upon whom assets are transferred. The New Jersey inheritance tax is imposed on the estates of all New Jersey residents as well as non-residents who own real or tangible personal property in New Jersey.

If the assets pass to a spouse, civil union partner, lineal ascendant, lineal descendant or charity, then the transfer is exempt from the inheritance tax. If the assets pass to a sibling, a son-in-law, daughter-in-law or civil union partner of one of your children, there is an inheritance tax of 11-16%. New Jersey does exempt the first $25,000 of the transfer though.

If the assets pass to anyone else, there is an inheritance tax of 15-16%, but the first $500 is exempt.

The proposed law is designed to target people who die owning homes in New Jersey but are residents of other states. Most of the estates of these decedents currently do not pay any estate or inheritance tax to New Jersey because the estate tax does not apply to them as a non-resident and the inheritance tax will only affect those who leave money to someone other than immediate family or charity.

If enacted, the modified New Jersey estate tax will require the representatives of people who die as residents outside of New Jersey to file a New Jersey estate tax return and pay a proportional share of taxes. For example, if a person's estate is $1,000,000 and they owned property in New Jersey worth $500,000. Normally, if the person was a New Jersey descendant, the tax would be $33,000. In this situation though, since 1/2 of the assets are outside of New Jersey, the tax would most likely be 1/2 of the $33,000.

The proposed tax would surely raise a significant amount of money in this cash strapped state. However, with a Governor highly opposed to any new taxes, I would be surprised it passes.